The True Cost of The Holiday Season $$$

Let me ask you something…

Are you more scared of getting coal for Christmas or to look at your credit card statement?  I’m guessing it’s the latter.  Ok time for a tough question, how much have you spent this holiday season?  Any idea?  If my husband asks me, I’ll just say I’m still tallying it up.  The problem is we can be so good all year long with our budgets, but when it comes to the holidays, gifts, and our children, it all seems to fly out the window.  Are you shaking your head in agreement with me yet?  Don’t feel bad if you’ve gone a little over board with your holiday shopping.  The average shopper spends an average of $929 on gifts (according to the American Research Group, Inc. survey), and if you add in food, decorations, and alcohol it goes up to $1611.30 [1]Are you thinking if you’re over or under the average now?

I started wondering whether it is better to spread the pain (or costs) of the holiday out over the course of the year, a few months, or jam it all in.  What I’ve done in the past and what tends to be my recommendation is to spread the purchases out so it isn’t an extra $1,000 right at the end of the year.  On the other hand, if you like to wait until the last minute, you can still put money aside each paycheck leading up to the holidays, which would work the same way.  But my thinking brought up a theory that while spreading out your purchases might be better, do we spend more since we have extra time to pay off the credit card bills?  The average early shopper spends $1,182, and this was a huge increase from 2015, which was $636[2].  The Christmas shopping season does start as early as Halloween, and maybe will even start on Labor Day next year with how the retailers are going.  With the festive items already out with trick or treaters, we start shopping earlier and earlier each year.  That being said I’m not surprised by the increase in spending by the early birds. 

Still pondering my theory, I took to Facebook to get some feedback.  The majority of comments agreed that buying gifts earlier and throughout the year is the way to go.  When you factor in late credit card payments, even if you spend more on gifts by buying earlier, you will most likely end up saving money.  You might not know how much you are paying in interest from your credit card balance, but most credit card rates can be upwards of 15-19%.  Yikes!  You’ll be paying for the holiday a lot longer with an interest rate that high.  Some people said retailers will hike up their prices as the holiday gets closer, which makes sense when you see the black Friday discounts.  Others mentioned lower stress levels if you start shopping earlier, which I can agree with.  The holidays can be stressful enough trying to please everyone so anything you can do ahead of time and mark off your to do list will help. 

So with everyone spending an average of $1,611 on the holidays, how much money is being pumped into the economy?  We are expected to spend about $655.8 billion during the season, that is billion with a B!  The expected amount is supposed to rise by 7-10% from last year or by $117 billion[3].  That is a HUGE increase in spending for our economy.  With so much money being spent in our economy, it is no wonder why we usually have a Santa Claus rally at the end of the year in the stock market.  Retailers will higher on average about 640,000-690,000 seasonal employees each year[4].  So we are spending more money, and more people are working, which usually helps the stock markets, which might help us!  So you may wish to continue spending your money because in some way it might make the market go up which might make your 401(k) go up.  Talk about finding the silver lining!  Who else can justify your spending like me?

So here are the statistics on the Santa Claus rally, yes it is real despite your feelings on the real Santa Claus.  Dating back to 1896, the Dow Jones Industrial Average has gained an average of 1.7% during the last 5 trading days of the year and the first 2 trading days after the New Year.  The Dow Jones rose 77% of the time during these seven trading days[5].  Some attribute the rally to the increase in spending, which means higher earnings for companies.  But there are a few other factors such as increased optimism on Wall Street and more stock traders taking end of the year vacations, are likely to contribute.  Now it doesn’t always work, and last year we did not get a Santa Claus rally. So here’s to hoping this year we will get one! 

Have a wonderful Christmas and holiday season!  And don’t forget just because you might have blown your budget during the holiday season, you can still get back on track for the next year.  Let’s start the New Year off right and click below to register for our Partnering for Prosperity Webinar next month!

Partnering for Prosperity Registration Link

appy Holidays!
Jessica Weaver, CFP®, CDFA™, CFS®
Wealth Advisor
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